It appears that the conventional thinking that life and non-life brands should be kept separate, is no longer true. A trend emerging from KPMG’s 2011 survey is the cross-selling of products. This is especially true among established insurers who are seeking to capitalise on an existing brand, by moving the brand into a new market space.
For example, Discovery, which offers health and life insurance, has recently launched a short-term product. Also, Old Mutual is now marketing short-term insurance in the form of iWyze. Conversely, short-term insurance giant Outsurance now has a life offering in its portfolio.
On the economic front, the industry faces some challenges. The turmoil in sovereign debt markets has already spilled over into the equity markets and may hamper South Africa’s ability to fully recover from its recession. The threat of the so-called ‘double dip’ recession is real.
The memory of increasing policy lapse rates during 2008 and the first half of 2009 is still fresh in the minds of life insurers. A volatile investment market does not bode well for the life insurance industry. The next six months will be vital.
The short-term insurance industry is less dependent on the investment market, and more dependent on good claims experience, which has been favourable in 2011 to date, with no large corporate fire claims and a general improvement in the loss ratios for motor insurance. However, the traditional short-term insurers have been struggling to achieve growth in recent times and a strained economy will not make it easier.
In addition to the economic challenges, the industry has to deal with a regulatory environment subject to significant change. There is a wave of new regulations that will all come into force at roughly the same time. The Solvency Assessment and Management (SAM) regime will become effective in 2014, as well as the Treating Customers Fairly (TCF) requirements. In addition, micro-insurance legislation and binder regulations are on the horizon. This, coupled with taxation uncertainties on the life insurance side, makes for a very fast rate of change in the industry.
For the time being, the impact of the proposed national health insurance (NHI) is still an unknown, with not enough solid information in the form of facts and figures emerging. It is definitely influencing the strategic thinking of players in the industry, but the uncertainty around it makes it difficult to act.
KPMG’s 2011 insurance industry survey also highlights the expansion of the more established life and non-life insurers into Africa, with offices and offerings in sub-Saharan Africa and further into the continent. Often insurers’ African expansion is in the form of joint ventures with local players or technology companies. Bancassurers have, as expected, followed the lead of their banking parents and used their infrastructure as the springboard.
This mixed bag of challenges and opportunity will see insurance companies being more cautious in their trading and operational updates for the remainder of 2011, despite a relatively strong start to the year.